Exclusive drug distribution deals that cut out wholesale suppliers, such as Pfizer’s agreement with Alliance Boots, could cost taxpayers hundreds of millions of pounds, the Government has been told.

A report by the Office of Fair Trading (OFT) published yesterday also raised concerns that exclusive “direct-to-pharmacy” schemes could result in patients having to wait longer for life-saving medicines. The watchdog found that such deals raised a “significant risk” of extra costs to the NHS because they allowed manufacturers to set prices paid by pharmacies.

The OFT has urged the Government to change its pricing policy — the Pharmaceutical Price Regulation Scheme — to prevent this, but it says that pharmaceutical firms should be allowed to choose their methods of distribution.

However, although such schemes may be more efficient, John Fingleton, the OFT chief executive, said: “The changes to the distribution of medicines are among the most significant for many years and have given rise to real concerns.”

He added that further action was needed to prevent increases in NHS medicine costs and to ensure that the standard of service provided by pharmacies to patients was satisfactory.

In March, Pfizer, the world’s largest drugmaker and the supplier of 15 per cent of Britain’s prescription medicines, announced a deal with UniChem, the wholesaling arm of Alliance Boots, to bypass its traditional wholesale suppliers and sell directly to pharmacies.

Since then, drug giants including Novartis and AstraZeneca have decided to restructure their British distribution channels. AstraZeneca plans to start its new scheme in 2008 using both UniChem and Celesio AG’s AAH Pharmaceuticals. Generally pharmaceutical firms supply wholesalers at a discount of 12.5 per cent and they, in turn, compete to supply pharmacies.

The Pfizer scheme has been attacked by independent pharmacists, MPs and wholesalers, who argue that restricting the distribution of all the company’s products to one British supplier poses a threat to competition, drug pricing, patient welfare and the NHS.

Both Pfizer and UniChem said that they were pleased that the OFT had recommended neither a formal investigation of the distribution scheme nor a referral to the Competition Commission.

Pfizer denies that the scheme increases the cost of medicines to the NHS and says that it needs the new system to stamp out sales of counterfeit medicines.

The new deals are fiercely opposed by independent wholesalers, who say that they stifle competition. Martin Sawer, the executive director of the British Association of Pharmaceutical Wholesalers, said: “We’re pleased the OFT is putting pressure on the Government to ensure fair competition and security of supply. Competition brings best value for the taxpayer.”

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